Tax on investments in the UK: dividends, capital gains and interest (2026/27)
How investments are taxed outside an ISA or pension: the £500 dividend allowance and new dividend rates, the £3,000 capital gains allowance, 18% and 24% CGT, savings interest and how to pay less tax.
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The three taxes on investments
1. Dividend tax
Dividends are payments companies make to shareholders, including through funds.
| 2026/27 | |
|---|---|
| Dividend allowance | £500 |
| Basic rate | 10.75% |
| Higher rate | 35.75% |
| Additional rate | 39.35% |
Your tax band is based on your total income, with dividends added on top. Rates from Charlton Baker.
2. Capital Gains Tax
When you sell an investment for more than you paid, the profit is a capital gain.
| 2026/27 | |
|---|---|
| Annual exempt amount | £3,000 |
| Basic rate | 18% |
| Higher and additional rate | 24% |
Gains count when you sell, not while you hold. Losses can be set against gains, and you can carry losses forward if you report them.
3. Tax on interest
Interest from bonds, cash in your account and bond funds counts as savings income. It uses your Personal Savings Allowance (£1,000 basic rate, £500 higher rate). Above it, tax is 20% or 40%, rising to 24% or 44% from 6 April 2027.
Worked example
You are a higher rate taxpayer with £60,000 of funds in a general investment account, yielding 2.5% in dividends:
- Dividends: £1,500. Minus £500 allowance = £1,000 taxable
- Tax at 35.75%: £357.50 a year
In a stocks and shares ISA, it would be £0, and any gains when you sell would be tax free too.
How to pay less tax on investments
- Use your ISA allowance first: up to £20,000 a year.
- Use pensions: tax relief going in and tax-free growth.
- Bed and ISA: sell investments held outside an ISA and buy them back inside one, using your annual allowance and £3,000 capital gains allowance.
- Use both partners' allowances if you are married or in a civil partnership. Transfers between you are free of Capital Gains Tax.
- Keep records of what you paid, including fees, to work out gains correctly.
Do I need to tell HMRC?
You need to report it, usually through Self Assessment, if:
- Your dividends are over £10,000 a year, or you have tax to pay above the allowance that is not collected through your tax code
- You sold investments and made gains over £3,000, or sold assets worth more than £50,000 in total
HMRC can sometimes collect smaller amounts of dividend tax through your tax code instead.
Free toolISA allowance checkerSee how much of your £20,000 ISA allowance is left before 5 April, across every type of ISA.Common questions
Do I pay tax on a stocks and shares ISA?
No. There is no income tax or Capital Gains Tax on investments inside an ISA, and nothing to report.
What is the dividend allowance for 2026/27?
£500. Dividends above that are taxed at 10.75%, 35.75% or 39.35% depending on your tax band.
Do I pay Capital Gains Tax on funds I have not sold?
No. Capital Gains Tax only applies when you sell or give away an investment.
This is general information, not personal tax or financial advice. Tax rules change and depend on your circumstances, so check GOV.UK or speak to an accountant before acting.
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